Leadership transition is gaining the attention of many concerned about the capacity and effectiveness of nonprofits because quality of leadership is widely recognized as a significant variable.
And, by all indications, an “era” of transition
Today, of an estimated 1.6 million nonprofit organizations in the U.S., roughly 10-12 percent are managing a transition in executive leadership at any given time; in some communities this means a hundred organizations annually. The rate of transitions is expected to climb by 15 percent or more in the next five to seven years as the baby-boomer generation—many of whom founded organizations 20 and 30 years ago—reaches retirement age.1 Further, according to recent surveys, 15-35 percent of nonprofit executives plan to leave their current positions within two years and 61-78 percent are planning to leave within five years.2 From 1994 to 1997 the David and Lucile Packard Foundation found executive turnover in 45 percent of its grantees.
The incidence of executive transitions is on the rise; mounting empirical evidence suggests that a change in nonprofit organization leadership has a direct impact on capacity—particularly in smaller organizations, and in organizations with founders or long-term executive directors who leave. It is imperative that stakeholders in the nonprofit sector review what we know (and what we suspect) about transitions and transition services.
Fortunately, the theoretical groundwork preparing the sector for the dramatic and inevitable changes in the leadership has already been laid. Few other elements of capacity building seem to enjoy this degree of focused attention. The body of research on executive transition is unusually rich in results for different levels and types of interventions. The three major waves of research on transition initiatives over the past 20 years have provided important guidance to nonprofit boards and executives, as well as to funders and capacity builders, about promising practices in transition management. With growing appreciation for and deliberation on its complexities, the process is yielding greater successes.
Neighborhood Reinvestment pioneers transition services. Their experience suggests that a comprehensive, organization development perspective during transitions increases the likelihood of success.
Neighborhood Reinvestment (NR), a publicly supported national nonprofit working through a network of local nonprofit housing organizations to revitalize neighborhoods and expand affordable housing, launched the first wave of concentrated research on executive transitions. In 1991 the median tenure for executives was three years. The high rate of leadership turnover was severely limiting the effectiveness of local groups, affecting the entire network as well, and it prompted NR to explore the issue of leadership change.
NR initiated a research project to conduct a study of needs, collect relevant data, and develop a working hypothesis on the dynamics of leadership transition in their network. This five-year pilot study monitored 100 executive transitions (occurring at a rate of 15-30 each year) and developed in-depth case studies of 10 transitions.
The key findings from the 100 transitions were: (1) that the process begins when an executive announces his or her departure and continues through the first anniversary of the new executive; (2) that when the founder of an organization leaves, the impact is large and the transition is often complex; and (3) that most transitions are “non-routine”—involving an organizational crisis due to funding instability, leadership ineffectiveness, or other fundamental issues. Seventy-one percent of the sample were non-routine, 17 percent were routine, and 12 percent were start-up organizations.
A framework outlining three distinct phases of executive transition services was developed, refined, and evaluated through hands-on work with the 10 case-study organizations: (1) getting ready/preparation; (2) recruitment and hiring; and (3) post-hiring. Each phase built on the preceding and failure to attend to the key tasks at any point increased the odds against a successful outcome. In fact, the principal conclusion from NR’s early research was that technical assistance “providers working together can improve the odds for a successful transition that serves the community and mission of the organization.”
These findings were bolstered by data from NR’s annual scan of network members (approximately 200 organizations). Between 1991 and 1997, median executive tenure increased from 3.0 to 5.2 years. Organizational health (as measured by an internal NR rating system) increased from 67 percent in 1991 to 90 percent in 1997. Additionally, during this period, NR documented a significant increase in local reinvestment and new homeowners—two essential measures of impact for community development organizations.
While these more generalized surveys do not prove a direct correlation, they suggest that increases were due, in part, to the transition project, as well as other environmental factors, including NR’s emphasis on capacity building technical assistance in general.
CompassPoint adapts the NR model, advancing the understanding of transition as a moment for organizational reflection, adding the notion of interim executive leadership to the mix, while also documenting the relative impact of comprehensive transition services (found to be more effective) compared to less comprehensive services.
In the late 1990s, San Francisco became a focus for work on executive transitions. CompassPoint Nonprofit Services and the Management Center—two management support organizations (MSOs)—launched executive transition service programs in 1998.
A survey of 137 nonprofit executive directors conducted in April 1998 revealed that most respondents saw their positions as a “one-time-only” event. Examined in light of a corresponding phenomenon of high executive turnover, the implications of this revelation for constructing a pool of experienced executives is obvious.
CompassPoint built its transition program around two main services: organization development consulting and interim leadership support. Organizational development includes assessment, coaching the board through the transition process, executive search, and coaching the new executive director. Interim support services include assistance in hiring and supporting interim leadership.
The focus on interim services and on the role interim directors play in providing emotional space for organizational renewal is one of the largest differences between CompassPoint’s services and early transition services offered by Neighborhood Reinvestment. In his paper, “Into the Fire,” Michael Allison3 attributes this focus on interim leadership, and the understanding of transitions as an opportunity for organizational renewal, to the experience of the Presbyterian Church of Northern California. “The church treats leadership transition as a naturally occurring event in the life of a congregation (rather than an unanticipated crisis to be avoided)… A central feature (of their management of transitions) is the requirement that a congregation take a full year for reflection and renewal between pastors.”
CompassPoint evaluated its executive transition services at the end of its first and second years of operation. In the first year, the evaluation focused on descriptive information, evaluation of process, and satisfaction feedback. In the second year, 12 organizations that had used executive transition services the previous year participated in a survey exploring the effectiveness of transition services. Although this was a small sample, two findings were particularly striking:
- All but one organization reported that they are either “healthier” or “much healthier” since the new executive director was hired. (“Health” was defined as growth in budget, strength of board and staff, and degrees of job satisfaction reported by new executives and board members.)
- Also, since the new executive was hired, 33 percent of the executives reported that their agencies are serving new populations; 44 percent reported that they are offering new programs; 33 percent stated that they are serving higher numbers of clients; eight out of nine executives reported staffing improvements; two-thirds or more of the executives and board members reported that the board is stronger.
In summarizing their findings, CompassPoint says, “Our internal records and follow-up… appear to indicate that the organization’s success is related to the comprehensiveness of services used. Of the eight organizations that used interim services only, four are struggling or have already lost the new executive director. On the other hand, of the 20 organizations that used organization development services—with or without interim services—only three are struggling or have replaced their new directors within a year.”
While the cost of more comprehensive services was found to be prohibitive for some, the evaluator recommended that Com